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SACCO lending policies and procedures

……………………………………………
SAVINGS AND CREDIT
CO-OPERATIVE SOCIETY LTD

LENDING & COLLECTION POLICIES AND
PROCEDURES

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SACCO lending policies and procedures

TABLE OF CONTENTS

Introduction………………………………………………………………….2

1. Eligibility of borrowers………………………………………………….....2
2. Period of membership……………………………………………………....2
3. Savings Account……………………………………………………………2
4. Loan size………………………………………………………………… ...2
5. Loan period…………………………………………………………………3
6. Loan repayment installments………………………………………………..3
7. Interest on loans…………………………………………………………….4
8. Other lending fees…………………………………………………………..4
9. Penalties on delayed or late repayments…………………………………….4
10. Location /residence of borrowers………………………………………….4
11. Accessing Loans…………………………………………………………...5
12. Collateral/ security for loans………………………………………………5
13. Guarantors and endorsements to any loan application form………………5
14. Site Visits by the Loans Officer…………………………………………...6
15. Recommendation of loan applications to the loans committee……………6
16. Displaying the Names of intending borrowers……………………………7
17. Approval of loan applications……………………………………………..7
18. Training of shareholders…………………………………………………..7
19. Loan Documentation………………………………………………………7
20. Loan repayment schedule………………………………………………….8
21. Securing the Securities/Collateral………………………………………….8
22. Disbursement and repayment of loans…………………………………….9
23. Special Loans……………………………………………………………..9
24. Loan processing Cycle…………………………………………………...10
25. Loan Monitoring and follow up…………………………………………10
26. Borrowers-Society Relationship…………………………………………10
27. Handling Loans in Default……………………………………………….10
29. Provision for bad and Doubtful Loans…………………………………...11
30. Loan Records…………………………………………………………….12
31. Operational of the Loans Committee…………………………………….13
33. Performance Standards…………………………………………………..13
34. Application of the Lending Policies and Guidelines…………………….14
35. Compliance with the lending Policies and Guidelines…………………..14
36. Revising or Changing the Lending Policies and Guidelines…………….14
Appendices………………………………………………………………………………15-36

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SACCO lending policies and procedures

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SACCO LENDING POLICIES AND GUIDELINES

Introduction
These lending policies and Guidelines (LPG) have been developed and approved by
members of ……………………….SACCO at their annual General Meeting held on 10 th
July 2009. The LPGs shall be used and strictly complied with in all lending operations by
the society. Anyone who in the service of the society purports to make any loans without
following the provisions of these lending policies and guidelines shall be personally
liable for any loss suffered by the society arising out of such loans. In addition,
disciplinary action shall be taken against the responsible officer or leader.

In its lending operations, SACCO will be guided by the principle of ZERO
TOLERANCE FOR LOAN DEFAULTS

1. Eligibility of borrowers

Eligible borrowers of …………………….. SACCO Ltd shall be fully paid up
shareholders operating active savings accounts. The shareholders may be individuals,
groups of individuals or institutions such as schools or other cooperative societies.
Eligible loan applicants shall not be defaulters on any outstanding loans or guarantors for
defaulting borrowers.

2. Period of membership

Any shareholder wishing to apply for a loan from …………………………. SACCO
must have been a member for at least 2 months

3. Savings Account

A loan applicant must have an active savings account which must have been operated for
at least 2 months. This is in addition to being a fully paid up member for at least 2 months

4. Loan size

The maximum loan size that can be extended to any borrower shall be determined in
accordance with the interest and support given to the society by the applicant as
determined by the number of shares he/she holds and how active he/she is in the society’s
savings programme

The actual loan size shall be determined using a combination of the following;
The ratio of the borrowers share capital to the loan
The savings pattern of the borrower
The loan graduation stages of the borrower

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000. Loan repayment installments Any loan extended by ………………….000= The second loan shall not exceed 2.000. Loan Period To enable many members to access the society’s credit facilities particularly so.000= 1.000= The fourth loan shall not exceed 5. a sufficient sum will have been built to fully settle it.000. SACCO lending policies and procedures a) The ratio of share capital to loan size shall not exceed the ratio of 1 to 5 b) The ratio of average savings (over the last four months gradually built up and not deposited in a lump sum) to the loan size shall never exceed the ratio of 1 to 10 The actual loan size shall then be a sum of the two (a) and (b) but subject to (c) below.000= 800.000= 2.000.000. SACCO shall be repaid in maximum period of 7 months from the date of disbursement. the loan size arrived at by adding (a) and (b) shall further be subjected to the following loan size graduation limits. The loan shall be repaid in 6.000= The six loan shall not exceed 10. 4 . However. shareholders shall be encouraged to approach formal commercial banks for assistance 5. borrowers shall be encouraged to make advance loan prepayments even in smaller sums provided that by the installment due date.000= 1.000.000. For group For individuals The first loan shall not exceed 1.000= The fifith loan shall not exceed 7.000= 300. the loan period shall be 7 months 6.500. at the time when funds are scarce.000. Equal monthly installments. c) In order to arrive at the final loan size to be recommended for approval.000= The third loan shall not exceed 3. There shall be a grace period of one month.000= For higher rounds and amounts of borrowings.000= 500.

priority in lending shall be accorded to borrowers who are located and reside in ………………. Penalties on delayed or late loan repayments Delayed or late repayments shall attract a penalty fee of 10% per month on all amounts overdue on a compound rate basis. Interest on loans All loans attract an interest rate of ……% per month charged flat. Through a partnership with the local council administration. The lending (interest) rates shall be regularly reviewed by the loans committee to bring them in line with economic changes (inflation. etc shall not be shifted to other areas without the consent of the society 5 . Location/Residence of the borrowers To minimize the costs of processing. 10. they shall provide immovable loan securities located in …………………… and guarantors who are residents in ………………….000 1. households items. i) Loan application fees of shs 2000= ii) Loan processing and documentation fees of 1 % of the approved loan before its disbursed 9.000 with a 4 months loan period at an interest rate of 2% per month. SACCO lending policies and procedures 7.. Loan applicants working and residing in other places like outside …………………. borrowers who have not yet fully repaid their loans shall not be allowed to sell their properties and shift from their places of residence and reference (for borrowing purposes).000 2nd Month shs 6. Interest shall be paid monthly together with the principal loan installment. cost of capital..g cows.000 3rd Month shs 6. shall be considered in exceptional circumstances and in such situations. Other lending fees In addition to paying the interest on loans. 1st month shs 6. Assuming a first loan of shs 300. borrowers shall also pay the following. loan securities e. risks) associated with enterprises/activities to be financed and competition which may have taken place in the area. operational costs. interest payable by the borrower shall be calculated as follows. Likewise. monitoring and follow up on loans as well as service delivery. This shall be on top of the interest rate of 2% per month.000 4th Month shs 6.. The same applies to the guarantors.

The agreement shall also state that in the event of failing to repay the loan within the agreed period. The loan form shall be sold to the intending applicants at shs ………… each The loans shall be applicable to any viable economic activity that is legally and ethically acceptable in the applicant’s community. SACCO lending policies and procedures 11. In the loan agreement. Accessing Loans All loans from ……………………… SACCO shall be accessed by a written application made on the society’s prescribed loan application form. household items. Consumption educational and home- improvement loans should be discouraged 12. savings. Guarantors and endorsements to any loan application form Every loan applicant must provide 2 guarantors. business assets. Acceptable loan securities shall include land. The persons proposed to be the borrowers’ guarantor must: Be members of the society Have a good track record in regard to paying their own loans Not be guarantors of another outstanding loan which is default Not be a spouse of the borrower Have capacity to repay the loan Have a close relationship with the borrower Be of sound mind and adults In the event of the borrower failing to honor his/her loans obligations. the ownership of the security/collateral pledged for the loan shall rest with the society. Collateral/Security for the Loan All loans extended by ……………………SACCO shall be secured by a security/collateral whose value shall be atleast 3 times the size of the loan granted plus interest thereon. the society shall be free top take and sell the security/collateral without any hindrance from the borrower or any other person or courts of law. society’s share certificates. the borrower shall state that the security/collateral pledged for the loan is free from any encumbrance and that as long as the loan has not yet been fully repaid. cattle and other valuable domestic animals. the guarantor must: Bring pressure to bear on the borrower to repay the loan Repay the loan Forfeit his/her share capital as well as saving deposits in the society 6 . 13.

The existence of the proposed security. condition and possible realizable value in case of sale Concurrence by the borrowers spouse about the security provided. The concurrence of the guarantors to the proposed borrowing and the roles and responsibilities under the society’s lending regulations. SACCO lending policies and procedures 14. its ownership. The site report shall among others cover The officers findings in respect of the economic and financial viability of the business to be funded The financing gap of the business The applicants credit record The borrowers capacity to pay the loan The borrowers capacity to repay the loan The applicants share capital in the society and balance on the savings account Opinion of the spouse on the proposed borrowing Adequacy of the proposed loan security The credit and willingness of the proposed loan guarantor Adequacy of the proposed loan security The credibility and willingness of the proposed loan guarantor 15. and above. Discussion with the applicants to ascertain their seriousness and commitment to the business/activity for which borrowing is sought Enlisting the support of the village local council in securing the borrowers proposed loan security/collateral. Site Visits by the Loans Officer The society’s loans officer shall carry out a site visit to each loan applicant for all loans of shs ……………. The purpose of the site visits shall be to verify information given in the loan application form. During the site visit. the loans officer shall check the following: The existence of the activity/business for which the loan is required The concurrence of the spouse (in the case of married applicants) to the borrowing proposal. the manager shall make recommendations to the loans committee 7 . The loans officer shall prepare a site visit report on each applicant visited. Recommendation of loan applications to the loans committee After management has reviewed the loan applications and site reports.

the society’s governance. The approval of the loan shall be granted after the committee has checked and satisfied itself in respect of the following: Character of the applicant Credit history of the applicant The borrowers capacity to utilize and repay the loan The applicants own capital contribution to the proposed business/activity The adequacy of the collateral/security being offered Characteristics of the loan e. The approval or rejection shall be in writing as provided for in the application form. The loans committee members will act together. Approval of loan applications The loans committee shall be the only authority of the society to approve or reject any loan application. Training of shareholders On a regular basis. 19. the society shall conduct training programmes for shareholders in society’s savings and credit operations. purpose.g. Loan Documentation A binding loan agreement enforceable by the courts of law shall be entered into between the borrowers and the society. amount. The loans committee shall crosscheck the correctness of any of the adverse information received before using it. None of its members nor its chairperson should approve the loan applications single handedly. banking culture and loan management and obligations of borrowers to repay the loans. Participants in these training programmes shall meet the costs which shall be kept as low as possible. source of repayment. SACCO lending policies and procedures 16. Shareholders with comments on any of the loan applicants shall be free to confidently submit their comments or suggestions to the chairperson of the loans committee or manger within 5 days after the publication of the names. time or duration of the business cycle. risks associated with the business or activity to be financed. The chairperson of 8 . 18. entrepreneurial skills. Loan applicants and shareholders aspiring to be elected to the various leadership positions in the society may be made to undergo some simple tests in the important areas of loan management. the borrowers spouse and witnesses. Displaying the Names of intending borrowers The manager shall prominently display on the society’s Notice Boards or any other appropriate place names without the value of loans) of all loan applicants being recommended to the loans committee for loans. The loan agreement shall be signed by the borrower and counter signed by the guarantor. 17.

SACCO lending policies and procedures the loans committee shall sign on behalf of the society and shall be witnessed by the manager. the schedule shall be completed to show: Actual. dates of repayment Actual amounts paid Amount overdue Penalties on delayed/late payments. Loan repayment schedule A loan repayment schedule showing the following shall be prepared in duplicate and the borrower shall be given a copy for information and record. 20. A sample of a loan repayment schedule is shown on the next page 21. A sample loan agreement is attached to these LPGs. Securing the loan Securities/Collateral All securities provided for the loan must be secured by: Signing of a loan agreement. which shall have the right to dispose it off in case the borrower fails to fully repay the loan. the ownership of the society/ collateral shall rest with the society. The schedule shall show: Names of the borrower Location of business/borrowers residence Principal loan sum Interest payable on the loan Total amount due (full loan) Due dates and size of installments When loan repayments commence. which transfers ownership of the security/collateral to the society Deposition of land titles or any relevant registration documents with the society by the borrower 9 . The loan agreement shall among others stipulate that until the loan has been fully repaid.

accidents. 10 . the society shall give very small loans without subjecting them to the normal appraisal and approval process.% and loan insurance fee of….% of the loan approved will be charged. each loan shall not exceed Shs …………. To extent possible. SACCO lending policies and procedures 22. the Manager shall compile a report on all special loans made and submit it to the chairperson.% per month. i) In the case of the small loans. installments. Special Loans The society shall to the extent possible endeavor to meet the emergency and critical needs of its members. Furthermore. loans should be disbursed in weekly batches. b) School fees loans to cover school fees needs of members’ children. etc. The borrower’s loan repayments shall be credited to this account. The following special loans shall be made to cover the mentioned needs: a) Emergency loans to cover urgent medical treatment. Disbursement and repayment of the loans Loans shall be disbursed by debiting the borrowers Loan Account.. emergency and short term loans shall be paid in lumpsum v) Loan securities/collateral shall be provided and their documentation and that of the loan shall be carried out like in the case of other ordinary loans vi) The manager shall approve the loan applications for all special loans. ii) In the case of the school fees. each loan shall not exceed Shs ………… and shall not be repeated within a period of 1 Months. This will be in line with its founding principles. School feel fees loans shall be paid in …. months only ii) Either of the loans shall attract an interest rate of ……% per month on a flat rate School fees loans shall attract normal interest rate of …. 23.. deaths. c) Very small loans to meet the financial needs of the financially disadvantaged members. monitoring.and shall not be repeated within a period of 3 Months iii) Loans for emergency medical treatment shall not exceed ………………. the applicant must be a fully paid up shareholder with an active savings account and must not be or has been a defaulter on any other society loan. iii) A one time loan application fee of Shs ……… and processing fee of …. and shall not be repeated within 1 months The following shall be the loan terms and conditions for these loans i) Loans periods for all special loans shall be …. In either of the above cases. iv) The loan repayment shall be made as follows. follow up and recording. Loans committee who will report to the board in its monthly meeting.. This will facilitate loan documentation. At the end of every week.

Borrowers – Society Relationships The borrowers must maintain a healthy relationship with the society during the term of their loans through regular contacts and discussions. due regard will be made to the borrowers business profitability and sustainability interests. the loans officer shall visit and discuss with the borrower and the guarantors the problem of the defaulted loan repayments. The loans officer shall keep a record of the discussions held. the borrower will have been reminded about the installment that is falling due. If resources allow. 27. only the loans committee must approve all loans made by the society). Borrowers with any specific problem regarding the performance of their business should always liaise with the society management for advice and technical support. Any diversion of the loan funds shall lead to the cancellation of the loan and its immediate recalling Providing technical support to the borrowers in their needful areas. Loan Monitoring and follow up The loans officer shall carry out regular visits to borrowers for the following purposes: To ensure that the loan funds are used for the intended purposes. the following steps shall immediately be taken to recover the amounts in default: i) Seven days to the due date. Loan processing Cycle Within14 days of applying. Ensuring that loans are fully repaid and that payments are made on time is a challenge for the entire society 9 members. the Loans Officer should visit the client one day after due date. the applicant shall be informed about the status of their loan applications 25. This could be one day or several days past that due date. committee and management). The borrower. The society shall also endeavor to ensure that in its quest for full loan recovery. iii) If in spite of the understanding reached with the loans officer. the borrower shall together with the loan guarantors be summoned to a meeting with the manager and the loans committee 11 . the loan guarantor and the loans officer shall all sign the minutes of the discussions. the payment is not received within the following 7 days. Otherwise. Delivering loan repayment reminders plus any other information 26. In case any borrower is in default on loan repayments. Handling Loans in default A loan is late or in default if it is not paid on its due date. ii) Within 7 days after default. profit and sustainability. 24. SACCO lending policies and procedures (These are the only exceptional loans that the manager can approve.

vi) The proceeds from the liquidation of the security shall be applied to the settlement of the loan obligations. Objective classification of bad and doubtful loans and making provisions for them could be made using the following rates. Provision for Bad and Doubtful Loans It is prudential to assume that some of the society’s outstanding loans may not be repaid in spite of the precautions taken by the society’s management and leadership. iv) If the borrower does pay within the given 7 days. the manager shall serve him/her a notice of loan recall. the balance due shall be recovered from the guarantors’ savings account and share capital. it is necessary that management should make provisions (out of its operating income) against the possibility of bad and doubtful loans. Provisioning for bad and doubtful loans Classification (No. Confiscating and liquidating the loan security v) The society or its agent shall confiscate the security and liquidate it (sale it by public auction or private treaty to the highest cash bidder) in the presence of the borrower. SACCO lending policies and procedures members. of days over due) Provisioning (Rate to be applied to the loan with any amount that is over due while making provisions) Current loans 0% 1 – 30 days 10% 31 . viii) Names of the defaulting borrowers shall be displayed on the Society’s Notice Board or any other public place where the society normally displays notices 29. paying off the confiscation and liquidation expenses and the surplus (if any) shall be credited to the savings account of the borrower. All confiscation and liquidation expenses shall be on the account of the defaulting borrower. In view of this therefore.60 days 25% 61 – 90 days 50% 91—120days 75% 121 – 180 days 85% 181 days and above 100% 12 . The matter of defaulting on loan repayments and its consequences shall be discussed and a period of another 7 days given to clear the amounts over due. The notice shall be copied to the loan guarantors and local council 1 chairperson. The notice shall also spell out the following actions which are to be taken immediately: Applying the balance on his/her savings account and share capital to settle the loan default Blocking the loan guarantors’ savings account and share capital. vii) In case the proceeds from the liquidation of the security (plus the borrowers savings account and the share capital) do not cover the loan obligations and the liquidation expenses.

Amounts in default (Principal and interest . SACCO lending policies and procedures The manager shall keep a loan ageing record for all loans overdue. Names of borrowers . which shall among others show the following information. Loans which are over due by 180 days should be written off as shown in the above table. Amounts due (by end of month) . Loans Records In addition to the borrower’s loan repayment schedule. Loan balance outstanding . Amounts lent out and expected interest thereon . which will be used in the making of the provisions for bad and doubtful loans. Amounts repaid on a monthly basis . Portfolio at Risk (Days over due for principal and interest) 13 . 30. . Dates of loan disbursements . the manager shall keep auditable loan records. The format of the loan ageing schedule is shown on the following page.

SACCO lending policies and procedures 14 .

SACCO lending policies and procedures 31. the Loans Committee shall not be involved in the Society’s routine management businesses. Apart from the handling loan applications and helping management follow up on stubborn/defaulting borrowers. In processing and approving loans. the Loans Committee shall not be unduly influenced by the Board or Management. Such allowances shall be determined by the committee and approved by the Annual General Meeting. the Loans Committee shall exercise total independence in course of executing its duties. Operations of the Loans Committee This Loans Committee shall have atleast 3 members (drawn from the Committee) with atleast one of them being a woman. no preferential treatment shall be given to the Loans Committee members and any other member of the governance committees Committee members’ personal interests in any loan application shall be declared to the members and the concerned member shall disqualify him/herself from the approval process of such application. The society’s Manager and loans officer shall be ex-officio members. 15 . Notwithstanding the Terms of Reference for the Loans Committee as stipulated in the Society’s Governing regulations. The Loan Committee members’ applications for loans be handled and approved by the committee after receiving appraisal reports and comments by management. Performance Standards In managing its lending operations. the Loans Committee may co-opt other members from parishes or sub-counties. The members of the Loans Committee shall meet once a month and shall be paid a sitting allowance to cover their direct expenses associated with attending the meetings. which are not represented on the committee whenever loan applicants from that area are being processed. the Society shall be guided and endeavor to meet and improve on the micro-finance best practices’ generally accepted portfolio performance standards. In course of executing its routine duties. 33. To ease its work.

Under minute Number………… of the Board meeting held on that date ……………………… …………………………………. savings. the staff member or leader shall be dismissed from his/her position and later on from the society. Chairman Secretary/Manager/Treasure APPENDIX 1 16 . External Loans Funds. If not desisted from. SACCO lending policies and procedures 34. Approved on……………………. Application of the Lending Policies and Guidelines These Lending Policies and Guidelines shall be used in conjunction with the Accounting and Operations Manual for the Society.. Compliance with the Lending Policies and Guidelines Any Management staff or Loans Committee Member or Society Leader who does not comply with the society’s LPGs in handling loans shall be held personally liable for the full repayment of the loans involved plus the interest thereon. Revisions or changes made must be approved by the members at their Annual General Meeting before they are implemented. Revising or Changing the Lending Policies and Guidelines Revising or changing the Lending Policies and Guidelines to bring them in line with developments in the market or changes in the operating environment shall be the responsibility of the Board acting through the Loans Committee and Management. Conditional Grants or Managed Funds shall carry lending terms and conditions stipulated by the partners but will also be managed with the same vigilance. 36. 35. They shall be applicable to the Society’s own funds (share capital. operating surpluses or unconditional grants)..

……………………………………………………………………………………………… Have u ever borrowed money from this SACCO? If yes how many times?.. Business Details Type of business …………………………………………………………………………. How much?..... of shares held in a Value of shares........ Do you have any loan in any other financial institution? From where?.............................ward/LC……………… Parish…... No............................ Total capital in business Ug shs………………………………………………………….................................... Monthly gross business income in Ug shs…………………………………………………......... Number of dependants Highest level of education Date when joined the Membership no......Sub-county…………………….. Savings account no SACCO... Expenditure on other incomes Ug shs…………………………………………………….. Date when the loan is required…………………………………………………………….. SACCO lending policies and procedures ……………………………………………………….. SACCO…….... Purpose for which the loan is required……………………………………………………. From where will you get the money to repay the loan…………………………………….....plot no…………………………………. Is Business premise rented or owned?...... Balance on savings account...... Income from other sources Ug shs………………………………………………………….... Securities offered 17 ....... Monthly business expenses in Ug shs……………………………………………………… Mention other sources of incomes…………………………………………………………........................... Trading center…………………………….. Amount of money applied for……………………………………………………………… (Amount in words)…………………………………………………………………………................SACCO LTD LOAN APPLICATION FORM Name of applicant Residential address Location of business Date of birth Place of birth Marriage status Telephone no.. Date when business started………………………………………………………………… Location of business: street/road……………….

OR sell my assets pledged as securities for the loan without any hindrance from me or anyone else to recover any amount of the loan that I will have failed to pay...date ………… Spousal consent/ Family consent ……………………………………. Name ………………membership no………savings a/c no………..signature…………. Borrowers spouse Date Borrowers children 1)……………………………………. ………………….value…………………………………. Date 2)…………………………………. Committee Member Date 18 . are owned by the applicant and have not been pledged to any other person or financial institutions. to surrender the securities mentioned above to be sold by the lender to recover any loan amounts due in the event of the borrower failing to repay it as agreed. Signed ……………………………. 3) ……………………………………. ………………………. I also authorize the SACCO to deduct from my savings account.signature…………. Signature of applicant………………………thumb print………………. securities pledged by applicant exist in this village. SACCO lending policies and procedures 1) ……………………………………..cell confirm that the applicant is a resident of this village... Dated…………. share capital. Date 3)…………………………………. Chairman LC1 Date ……………………………… ………………………. do hereby voluntarily and unconditionally grant my consent for my spouse to borrow from the lender and also... Furthermore. Name ………………membership no………savings a/c no………...value…………………………………. I undertake to fully repay the loan applied for and interest thereon on the due date agreed with the society.being married spouse of the above herein called the borrower. 2) ……………………………………. We the undersigned agree to repay from our own sources the total amount of the loan owned by the applicant to the society if the applicant fails to repay the loan granted by the time it is due. Committee member Date ……………………………… ………………………. ………………… Date Confirmation from LCI We the members of the village council of ………………………….value ………………………………….... I undertake to assist my spouse repay the loan in full and not to obstruct the lender in any way in course of recovering the loans amounts due through the agreed means. …………………. Signed …………………………………… ……………….

.…………………Loan period Collateral…………………………………………………………………………………............................................. Signed by the manager…………………………………date ……………………… Loans committee Decision by the loans committee …………………………………………………… ……………………………………………………………………………………… Signed Chairman loans committee…………………………………date………….......... ................................. Manager’s recommendation………………………………………………………....date………… Committee member……………………………………….............................. Collateral…………………………………………………………………………….......................... Do the applicant repay very well?.... Recommendation by the loans officer…………………………………………………… Amount recommended …………………………..........date………… APPENDIX 2 19 .................. Committee member……………………………………….... SACCO lending policies and procedures FOR SACCO USE ONLY Society management Date member joined the SACCO………………………Date application is received…….......................... Amount recommended…………………Credit period……………………………... How is the applicant’s record in the society’s savings operations? Explain......................................date………….. Value of shares in the society shs………………………total savings in the society……… Loans officers site visit report……………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… Has the applicant ever been offered a loan by the society?...... Committee member………………………………………............................................................... Signed by loans officer…………………………………date………………………….....................date………… Committee member………………………………………..........

.) for a period of ………… months to be repaid to the lender as principal and interest thereon at the rate of ……….(the borrower) located in …………………………. % per month (calculated on a ……………………………basis) in monthly installments as specified in the attached Loan repayment schedule (which forms part of this loan Agreement). the two parties do here by agree to the terms and conditions here in below: THIS AGREEMENT WITNESSETH AS FOLLOWS: The Lender lends to the borrower a principal sum of Shs………………………. And whereas the lender.. SAVINGS AND CREDIT COOPERATIVE SOCIETY LTD of P. as a savings and credit co-operative society (financing agency) is desirous of lending to the borrower and where as the Borrower is desirous of borrowing from the lender... The borrower is presenting Mr.O Box…………………………………… (Here by referred to as the Lender). the lender may at any time thereafter demand payment of the whole amount of the loan principal and interest then due without following the repayment schedule hereto.. The Borrower shall also be liable to paying all loan recovery fees and expenses incurred by the lender in course of recovering the overdue loan amounts from him/her/it. SACCO lending policies and procedures THE REPUBLIC OF UGANDA LOAN AGREEMENT This agreement is made this………. By signing this agreement. if the borrower diverts the loan funds to any other purpose(s) other than the one specified in the loan application form or fails to pay any installments on time. 20 . Without prejudice to the provisions above.between……………… …………………….And ………………………./Mrs. …………. it is hereby agreed between both parties that in the event of Borrower failing to pay back on time hereinafter agreed as specified in the attached Loan Repayment Schedule.day of……………………./Ms…………………………. Unless otherwise agreed.and ………………… ……………… to be the guarantors for the loan being taken.. The borrower undertakes to use the money lent by the lender in accordance with the purpose stated in the loan application form dully signed by the borrower. the borrower shall be liable to pay a penalty of …………% per month (calculated on a compound rate basis on the principal and interest due) from the date of default to the date of full payment. (Shillings……………………………………………………. the guarantors undertake to repay the loan in full (loan principal plus interest and any other loan recovery fees and expenses accumulated thereon) that the borrower will have failed to pay on time and as demanded by the lender..

……………. After the lender has realized the loan amounts due (loan principal plus interest and any loan recovery fees and the recovery expenses) from the sale proceeds of the borrower’s securities. SACCO lending policies and procedures Additionally. 2…………………………………………………. Account Number……………………… Guarantor Date 21 . the Borrower and his/her/its Guarantors also here by authorize the lender to recover the loan amounts in repayment default from their savings accounts and share capital in ………………………….. Borrower Date Signed……………………. Account Number ……………………. the lender shall handover the balance. to the Borrower. Signed……………………… ……………. 3…………………………………………………. loan recovery fees and expenses) or any part thereof at the agreed time.COOPERATIVE SAVINGS AND CREDIT SOCIETY LTD (the lender). If the amount recovered wipes out the balances on the Borrower and guarantors’ savings and share capital accounts then they shall cease being members of ……………………………………………………COOPERATIVE SAVINGS AND CREDIT SOCIETY LTD( the lender)..... (Which are fully owned by the Borrower and are free from any encumbrances) 1…………………………………………………. interest. the borrower also hereby unconditionally surrenders to the Lender (as security for the loan) the following items listed below.. by this agreement it authorizes the lender to take and sell by private treaty or otherwise (without any obstruction or legal challenges from the borrower or the Borrower’s agents) the above securities hereby pledged plus any other property of the Borrower that may be necessary to recover the full amounts due without recourse to the courts of law. Account Number……………………… Guarantor Date Signed……………………… ……………. Additionally. In the event of the borrower’s failure to pay back all loan amounts due (loan principal. if any..

…………………. Borrowers spouse Date Borrowers children 1)…………………………………….. Date 2)…………………………………. SACCO lending policies and procedures SPOUSAL CONSENT/ FAMILY CONSENT ……………………………………..being married spouse of the above herein called the borrower. Furthermore. do hereby voluntarily and unconditionally grant my consent for my spouse to borrow from the lender and also. Signed …………………………………… ………………. Lender Date Witnessed by: (Name. to surrender the securities mentioned above to be sold by the lender to recover any loan amounts due in the event of the borrower failing to repay it as agreed under this agreement. Date 3)…………………………………. I undertake to assist my spouse repay the loan in full and not to obstruct the lender in any way in course of recovering the loans amounts due through the agreed means under this agreement. ………………….. Title and Signature) 1………………………………………………………………………… 2………………………………………………………………………… APPENDIX3 22 . …………………. ………………… Date Signed………………………………………………….

. ………………………………………………………………………………………./…... Education and working experience:…………………………………………………… Name of spouse:……………………………………………………………………… Date of birth of spouse:………………………………………………………………. Residence Location of residence:…………………………………………………………………. Location of business:………………………………………………………………… ………………………………………………………………………………………… Telephone contacts……………………………… Business premises rented or own property:…………………………………………... Education and working experience of spouse:………………………………………… Business Type of activity………………………………Age of Business:…………………….. House rented or owned?. for how long outstanding?) 23 .....loan period applied for………… Purpose of loan………………………………………………………………………….. Resident since……………………………………….../……....... Place of birth……………………………………………. Data on loan application Amount applied for …………………………………...... Proposed installment of applicant (how much does he think he/she can pay back every month)…………………………………………………………………………………… Information on business Composition of balance sheet: Composition of fixed assets (items and estimated value) ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… Composition of inventory ( if necessary attach list of inventory supplied by applicant) Item Quantity Cost price value Composition of debtors (regular clients. Personal data of Applicant Name of applicant:……………………………………………………………………… Date of birth:…... SACCO lending policies and procedures CREDIT EVALUATION FORM Date of evaluation………………………… Loans Officer……………………………........

... ……………………………………………………………………………………………… Information on cash-flow Sales Amount established according to client answer/records Trade: (Fill in amount of sales) Monday Tuesday Wednesday Thursday Friday Saturday Sunday Good day Bad day Average daily sales…………………………no of days worked per week Monthly sales:……………………………….. Savings at business verified:…………………………………………………………… Current /savings account in banks/other financial institutions verified…………………………………………………………………………………… …………………………………………………………………………………………… Composition of liabilities Loans Source of loan Amount Loan period Installment Outstanding balance Credit suppliers Name of supplier Amount Frequency of supply Day of repayment Information on suppliers (who are the main suppliers)………………………………. Production Item Quantity sold per Selling price Total per month month Cost of sales: 24 ... SACCO lending policies and procedures ……………………………………………………………………………………………… ……………………………………………………………………………………………… Cash at hand verified:……………………………………………………………………..

competition. …………………………………………………………………………………………… Other observations on household………………………………………………………… 25 ..week…………………… Amount of each purchase: minimum…………………maximum…………….medical………………. Assessment of management capacities of applicant:………………………………. power. ………………………………………………………………………………………….no. ………………………………………………………………………………………. Socio-economic Data of household Total no of regular household members………………...education……………………. Household expenses: Food…………………….. SACCO lending policies and procedures Trade Amount established according to client answer / records Time purchases are made during month ………………. Installments (consumption loan) Other incomes of household……………………………………………………. good or bad location. ……………………………………………………………………………………. telephone) Salaries (kind of employee and amount of wage)………………………………………… …………………………………………………………………………………………… ……………………………………………………………………………………………. ………………………………………………………………………………… ……………………………………………………………………………………….. ………………………………………………………………………………………... transport……………………….closing……………………..food at workplace…………………. other observation………………………………………………………………………. Average per month………………………………..... Rent…………………….utilities………………. Production: Item Quantity sold per Cost of materials for Total per month month item Operating expenses Utilities (water.. Rent…………….. Installment………………………………………………………………………………… Others (to fill when additional expenses are identified) ……………………………………………………………………………………………… ……………………………………………………………………………… Market and Management Assessment of market (type of clients. of children…………… Fixed assets of household value and estimated value………………………………… …………………………………………………………………………………………..

Past financial obligations(receipts)……………………………………………………. SACCO lending policies and procedures …………………………………………………………………………………………… ……………………………………………………………………………………………. --other business expense …………………. Loans………………….. --rent …………………. ……………………………………………………………………………………………. LC. Assessment of willingness for repayment Reference (neighbors. =surplus after sales ………………… --salaries …………………. --transport ………………… --food …………………. Credit from suppliers……… Cash at bank Equity …………………. others: ………………………………………………. suppliers. ……………………………………………………………………………………………... Savings………………… Inventory………………. ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………... --installment ………………. Total Assets……………. =repayment capacity ………………… SACCO NAME………………………………………………………………….. --cost of sale ………………. APPENDIX4 26 . Cash-flow +sales ………………... ……………………………………………………………………………………………… ………………………………………………………………………………………… Financial statements Balance sheet: Assets Liabilities Fixed assets…………….. Total capital and liabilities………. Debtors……………….. Short term liabilities……… Cash at hand…………. =surplus of business ………………… --total household expenses ………………… +other incomes …………………..

LOAN NO…………………………………… ADDRESS………………………………………………………………………. disbursed repaid interest repaid paid 27 . ACCOUNT NO…………………. SACCO lending policies and procedures LOAN LEDGER CARD CLIENT NAME…………………………………………………………………. LOAN DISBURSED…………………………………….CREDIT PERIOD………… LOAN PURPOSE………………………………………SECURITY………………… Date Voc Amount Principle Balance Accrued Interest Balance Fines Signature no.

SACCO lending policies and procedures APPENDIX 5 SACCO NAME …………………………………………………………………………… LOAN REGISTER Loan Borrowers a/c Address Amount Loan Purpose of Guaranto Security Expiry date of remarks Authorized no. name disbursed period loan rs pledged loan signature 28 .

SACCO lending policies and procedures APPENDIX 6 SACCO NAME………………………………………………………………………… LOAN TRACKING SHEET Date …………………………………… Prepared by ……………………………… checked by………………………………… a/c Client Amount Credit Principle no name disbursed period Expected Repaid Arrears Outstanding balance Principle Interest Total Principle Interest Total Principle Interest Total % in Principle arrears 29 .

.../…………./………… Installment payment Actual payment Due date Principal Interest Total Date Amount Balance Remarks paid outstanding 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 30 . SACCO lending policies and procedures APPENDIX 7 NAME OF SACCO ……………………………………………………………………………………………… LOAN REPAYMENT SCHEDULE Name of Borrower Address of Borrower LOAN Loan Principal Interest on Loan Shs shs Date of Loan Disbursement Expiry date of the loan ………/…………./……. …….

/…………... Date Period Disbursed outstanding not yet 1-30 31-60 61-90 91-120 121-150 151-180 180 +++ due days days days days days days 31 ./………. SACCO lending policies and procedures SCHEDULE FOR AGEEING OF OUTSTANDING LOANS Date……. Name of Borrower A/C Loan Loan Loan Principal Principal Days the principal Loan Amount is Overdue No.

000 500.000 22 Other Administrative expenses 3.500.000 100.000 Total Operating Income 9.000 13 Other operating income 1.000 2.000 2.400.500.000 Operating Net Income 1.000 5.000 14 Non Operating Income 15 Donations/Grants 1.000 1.600.000 1.000 ( includes depreciation) 23 Loan losses (Provisions for 1.000.100.000 600.700.000.500.000.700.000 7.000 32 .000.000 (financial costs) Total Operating Expenditure 8.000 5.000 300.000 Total Net Income 2.500.500.000 6.200.900.000 Total Income 10.000 20 Expenditure 21 Staff expenses (salaries&benefits) 2. SACCO lending policies and procedures APPENDIX 9 PERFORMANCE STANDARDS TO BE ACHIEVED BY SACCOS The following is a worked out example that shows how SACCO performance standards can be worked out and the rates that SACCOs should aim at achieving ABC Savings and Credit Co-op Society Ltd Income and Expenditure Statements for The year ending December 1999 10 Income 1999 1998 11 Interest and fee income (excluding 8.500.000 25 Non Operating expenditure Total Expenditure 8.000.000.000.000 interest accrued but uncollected on over due loans) 12 Investment income 500.000 doubtful and bad loans) 24 Interest and fee expenses 800.000 5.200.000 600.

000.000 34 Special Reserves/Provisions e.000 14.000 33 Retained Earnings 3.000 60.000 8.500.000 - Total Assets 24.000 33 .600. 1.900.000 30 Equity 31 Paid-in Equity (share capital) 5. SACCO lending policies and procedures ABC Savings and Credit Co-op.000.400.000 11.800.000 5.000 23 Other short term liabilities 200.000 3.000 15.000 500.000 500.000 15.g.000 20 Liabilities 21 Savings and time deposits from 12.100.000 25 Other long term loans 500.000 10.000 16 Fixed Assets (less accumulated 1. Society Ltd Balance Sheet as at 31st December 1999 10 Assets 11 Cash on hand and in banks 2.000 12 Mandatory cash reserves 500.000 10.000 400.000 740.500.300.500.000 32 Donated Equity 500.000 depreciation) 17 Other Assets 400.000 14 Loans outstanding 17.000 1.000 24 Loans from different sources 1.600.500.400.000 200.000 500.000 800.500.000 1.500.600.500.000 500.000 provision for doubtful and bad debts 35 Other capital Accounts 200.000 members 22 Other deposits 300.300.000 24.000 300.000 13 Short term Investments 800.000 400.000.000.000 15 Long term investments 700.

100 Increase in Shows whether the Current period NI Net Income SACCO Net Income is minus last period NI growing or not divided by last period 2.400-32.500-1. (The rate must be assets at opening 15.500 made last period Increase in Shows whether the Closing Savings less Savings SACCO is attracting opening savings Deposits more savings deposits divided by opeining 12.600 >25% 29% not.900 Increase in Shows whether the Closing less opening Membership SACCO is attracting mbrship divided by new members or not opening membership 500-350 >15% 43% 350 Increase in Shows whether the Closing less opening Share Capital SACCO equity is share capital divided increasing or not by opening share 5.100 >20% 48% previous period GI 7.600 higher than inflation) Increase in Shows whether the Current period GI Gross SACCO total income is minus previous Income (GI) growing or not period GI divided by 10.500 >20% 61% its previously was divided by loans 32.050-7.900 >30% 32% NI 1. SACCO lending policies and procedures ABC Savings and Credit Co-op Society Ltd Performance Standards (Expressed as Ratios or Numbers) Actuals for ABC SACCO as compared to standards Signs for Growth Performance What is being Working Actual Standard ABC’s Indicator measured figures Ratio Actual (000) Asset growth Shows whether the Average Assets in the SACCO assets are period minus opening growing over time or Assets divided by 20.500 >15% 41% than before savings 8.50-15.000-3.000-8.500 >15% 43% capital 3.500 Loan Shows whether the Loans made this Portfolio SACCO is making period less loans increase many more loans than made last period 52.500 Increase in Shows how innovative Total number of number of the SACCO is in trying products at close less The products to meet the various number at start 4 -2 number 100% needs of its members divided by number at 2 should be start rising 34 .

850 <10% <27% all the UPB is at risk not all outstanding 17.500 divided by total 48.200 paid in period Recovery How much of the due Total loans rate loans are recovered (principal) repaid 45.200 should have been paid Portfolio at How much could the Risk SACCO loose if all Un paid principle delinquent borrowers of loans with defaulted? Once overdue. SACCO lending policies and procedures Portfolio Performance Performance What is being measured Working Actual figures Standard ABC’s Indicator (000) Ratio Actual Delinquency How common is non Total principal in payment of due loans arrears divided by total loans that 2.800 just the single installment loans over due Aged How far behind are Total principal in Delinquent people in repaying their arrears divided by 2. arrears divided by 4.200 <5% 5% should have been 48.800 <5% 12% (Arrears rate) loans 35 .500 >95% 94% that should have been paid Loan Loss How many loans must Total loan rate (Write the SACCO abandon principal written off) because of non payment off divided by 500 <3% 1% total loans that 48.200 payments loans total outstanding 17.

000 investments Net Margin How much of the Gross Income is Net Net Profit/Total 2. it amounts disbursed 8.000.000 Should client per borrower expenses/Total 245+60 brought continually number of active forward from decrease Shs borrowers last period) over time 26.000.000 investments expenses)/loans 52.230 Financial Self Are costs covered by Total operating Sufficiency income? This should Revenue/Total improve over time expenses 9.800.500. use field agents 1 full time equivalents in the calculation Operating How much is it costing (Administrative Efficiency the SACCO to make its expenses + other 8.000+ >3% 15% made and other 1.000 systems and its per Shs lent costs should be declining Cost per What is the average cost Total operating 8.000.000.000 have a good 13% disbursed covers all amount disbursed 63.000 market 13% period interest rate Effective Rate Measures the extent to (Interest + loan Must cover of Return which the total earnings related fees & all costs and on the amounts charges) /Total 8.000 more financial costs) Office staff How many clients are Number of loans efficiency served by the outstanding/Total 350 1.000 above the its loans managed in the 63.400.000.400.000.000 margin related costs and a per period making profit making margin profits The SACCO should strive from months to months improvements in efficiency and aim at reversing any negative trend in either of the measurements 36 .000 >110% or 119% (including 8.000 for a 305 management team office staff team of 4 Loan staff How many loans does Efficiency the average field agent Number of loans manage? If the SACCO outstanding/Total 350 250 305 has part time staff.500. SACCO lending policies and procedures Operating Efficiency Performance What is being Working Actual figures Standard ABC’s Indicator measured (000) Ratio Actual Cost per Shs What is the average cost Total operating lent per loan? As the Expenses/total SACCO matures.000 >15% 15% develops efficient 52.500 >30% 24% Margin/Profit Gross Income 10.500 Interest Rate How much interest does Total interest Must be Charged the SACCO charge on income/Total loans 8.000.

000 100% 176% term external 12.000.000 provided) ………………………………………….300.000 deposits + other short term liabilities Capital To what extent is the (Revenue Adequacy SACCO financing its reserves + special investments out of its reserves + 10.000.000 <100% 130% worth compared to total NI divided by last 10.000 >115% 102% loans to be paid+ equity) Unproductive How much of the Current period GI Assets Ratio SACCO assets are not at minus previous work to generate period GI divided 5.000 50% 35% withdrawals from Average savings 12.500.000 >30% 43% own funds? shares/Total 24. SACCO lending policies and procedures Financial strength and protection of Assets and Savings Performance What is being measured Working Actual figures Standard ABC’s Indicator (000) Ratio Actual Productive How much of the (Investments + assets ratio SACCO asset base is at Net portfolio)/ work to generate (Sight deposits + 19.200..000.200.500.500.500.000 income? term deposits + 19.500.000 debt? period NI Cash cover Does the SACCO have enough cash to meet Liquid assets 4.000 assets Portfolio The extent to which the Loan loss protection loan loss reserves cover reserves/(affected the potential loan losses loan portfolio 1.000 savings? Acid test Does the SACCO has Total liquid assets Ratio enough liquid assets to divided by current meet its current liabilities liabilities(sight deposits +term deposits + short 22.200.500.SACCO LOAN PORTFOLIO REPORT 37 .000 >5% 21% income? by previous 24.000 >100% 63% &guarantees 2.000 period GI Debt to What is the relative Current period NI equity worth of the SACCO net minus last period 14.000.

APPPROVED BY………………… LOANS OFFICER MANAGER 38 . SACCO lending policies and procedures DATE……………. and Fresh Loan Disbursements Aged Portfolio At Risk (PAR) and Repayment Rates (RR) PAR > 30 (Days) PAR > 60 PAR > 90 PAR > 180 On-Time RR Cumulative RR (D) (D) (D) Ageing done as per best practices method and prepayments are subtracted for repayment rates PREPARED BY……………. (PAR). Month: Loan Balances & Repayments This Month End Value of loans disbursed this month Value of principal payments in arrears at month end Principal balance outstanding of loans in arrears at month end Principal balance outstanding of loans rescheduled as of month end Principal balance outstanding of loans refinanced as of month end Principal balance of loans written-off this month Cumulative value of principal payments due (including arrears) to date Cumulative value of principal paid to date (since start of SACCO Cumulative value of principal paid on-time to date Value of principal prepaid as of month end Loan Loss Provision Table Principal Outstanding No. ≥ 1 Day Refinancing. of Payments Principal Portfolio Provision Loan Loss Days Past Due Loans in Arrears Balances at Risk Rate Provision Current Loans 0% 1 – 30 Days Past Due (PD) 10% 31 – 60 Days PD 25% 61 – 90 Days PD 50% 91 – 120 Days PD 75% 121 – 180 Days PD 85% above 180 Days PD 100% Total Loan Loss Provision Ratio Key Indicators Arrears Rate Portfolio at Risk PAR ≥ 1 Day. Write-offs. PAR Adjusted for Rescheduling.